HSBC offers its first mortgages with a 40-year term.

HSBC is set to introduce an extended 40-year mortgage option starting tomorrow, aimed at attracting customers who might find it challenging to meet the monthly payments of shorter-term offers. This innovative mortgage term is geared towards individuals who are willing to commit to a longer mortgage duration in exchange for more manageable monthly payments.

The new 40-year mortgage will be available for both residential and buy-to-let properties. Initially, it will be accessible through brokers, with the direct availability from HSBC scheduled to commence on September 13.

Andrew Matson, Head of Mortgages at HSBC UK, highlighted that the extended mortgage term is designed to help more people enter the housing market: “We know that home ownership is a key life ambition for many people, but affordability can be an issue. We are delighted to introduce our first ever 40-year mortgage term to our customers. This move underscores our commitment to supporting aspiring homeowners in their journey onto the housing ladder. By extending the mortgage term we aim to help make mortgages more manageable with lower monthly repayments and homeownership a reality for our customers.”

The trend of “marathon mortgages” has been growing in popularity, particularly as increasing interest rates pose challenges for some prospective buyers to afford traditional 20- or 25-year mortgage terms. This trend is also fueled by the desire of first-time buyers to escape the cycle of renting.

While longer-term mortgages offer lower monthly payments, the total amount paid over the mortgage’s duration is considerably higher due to the cumulative effects of interest over time.

Although smaller lenders have previously offered 40-year mortgages, HSBC’s entry into this market is seen as a significant development, bringing ultra-long mortgages into the mainstream. Industry experts note that HSBC’s move reflects the market’s response to affordability issues arising from factors like rising living costs, interest rate increases, and stagnant wages, making longer mortgage terms a viable option for those seeking to step onto the property ladder.

Lewis Shaw, Owner and Mortgage Expert at Shaw Financial Services, pointed out that the introduction of 40-year mortgages by HSBC aligns them with the broader mortgage market trend. He highlighted the growing demand for longer mortgage terms, driven by the challenges of housing affordability relative to income levels.

Elliott Benson, owner and mortgage broker at Sett Mortgages, emphasized that HSBC is often known for offering competitive rates for first-time buyers, which could make this extended mortgage offering particularly attractive for those seeking a longer-term deal.

The shift towards extended mortgage terms is evident in the statistics, with the number of first-time buyers opting for mortgages with terms of 35 years or more reaching 19% in 2023, a substantial increase from the mere 2% recorded in 2005 when UK Finance began its records.

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